‘External factors’ behind ringgit’s slump, says BNM

 

The ringgit opened at a six-month low of 4.6280/4.6305 to the US dollar today, compared with yesterday’s closing of 4.6245/4.6285.

PETALING JAYA: Bank Negara Malaysia (BNM) said the sharp fall in the ringgit against major currencies like the US dollar and Singapore dollar was caused by “external developments”, and not a sign of weakness in the Malaysian economy.

In a statement today, the central bank said debt ceiling stalemate in the US, and pressures on the banking sector in the US and Europe had affected market sentiment, leading to higher demand for safe haven assets like the US dollar.

This also led to an outflow from most developing economies, including Malaysia, with investors moving to protect their investments, thus strengthening the US dollar.

“The ringgit faced clear depreciation pressures, just like many other currencies. Therefore, the recent decline of the ringgit is not limited to the Malaysian currency.

“The movement of the ringgit compared with Malaysia’s main trading partners is relatively slower, as measured by the nominal effective exchange rate (NEER),” it said in a statement.

The central bank said the ringgit’s movement will be determined by the market and BNM will manage the risks arising from the heightened foreign exchange volatility.

“BNM will ensure there is sufficient liquidity in the currency market so that market operations can function in an orderly manner,” it added.

BNM was confident the ringgit’s performance is set to improve once uncertainties related to developments in the global market are settled.

The ringgit opened at a six-month low of 4.6280/4.6305 to the US dollar today, compared with yesterday’s closing of 4.6245/4.6285.

The continuous decline in the value of the ringgit will make imports more costly, leading to fears that it will have an impact on the country’s inflation rate.

Earlier, deputy finance minister Ahmad Maslan said the government and BNM will discuss strategies to deal with the continuous decline in the value of the ringgit at the weekly Cabinet meeting today.

Ahmad attributed the decline in the value of the ringgit to the ongoing stalemate in the discussions over raising the US debt ceiling from the current level of US$31.4 trillion. - FMT